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World Bank concerned over high cost of remittances to the Caribbean
The World Bank has voiced concern about what it described as the exorbitant cost of sending remittances to the Caribbean and other places, saying that forcing migrant workers to pay as much as US$50 to send US$200 is “wrong.” The Washington-based financial institution said this is especially so when workers are “sending salaries they have earned in the hope of supporting their families back home.” It said US$200 often is a very significant sum for migrants’ family income.
“There was little price transparency and no global effort to address this problem until the World Bank helped form a coalition to monitor the process and create a ‘one-stop shop’ information system to help remittance-senders compare services and costs,” the statement said. The World Bank said the high cost of transferring remittances internationally has typically been caused by a combination of obstacles in each local market, both in sending and receiving countries.
These include a lack of transparency and consumer protection, legal and regulatory obstacles, a lack of payment system infrastructures and access to payment systems, a weak market environment without a proper competition, and weak risk-management and governance practices. These problems were discussed as the World Bank-led coalition joined in creating a new international standard called the General Principles for International Remittance Services, published in 2007.
The World Bank noted that in 2009, Heads of State of the world’s industrialised powers made a commitment to reducing the global average cost by five percentage points in five years – the so-called “5×5 objective”. In addition, the World Bank said it has provided a “variety of effective solutions” to addressing a high cost of sending remittances at the global, country, and municipality levels.
It said the Global Remittances Working Group that it has established has provided technical inputs and advice to partners to achieve the objective, together with monitoring the global remittance costs through RPW. At the country level, the Bank said it provided technical assistance to client countries to improve their remittance markets by addressing problems and obstacles through implementing the General Principles for International Remittance Services.
As a result, the bank said the cost of sending remittances has been reduced to about US$42.48 billion from 2009 to 2013 at the global level. It said the global average of sending a remittance of US$200 came down from 9.81 per cent to 8.95 per cent in the normal average and from 8.58 per cent to 6.62 per cent in the weighted average from 2008.
“Remittances are proven to be essential for the poor not only for their income but also for financial inclusion, education, health, and investments,” the World Bank said. “A reduction of remittance costs means more money is kept in the hands of migrants and their families.” The World Bank has also said that remittances to the Caribbean and other developing countries are expected to remain robust this year, despite increased deportations of migrant workers.
The bank said migrants from developing countries, including the Caribbean, are expected to send US$436 billion in remittances to their home countries this year.